Answer to Question #59179 in Macroeconomics for Junior

Question

Many economists pointed out that in the ...
dramatically.
A. Why would V fall?
B. What would this do to Q or P (= MV, or V=PQ/M)?
C. Is your answer consistent with what actually happened?
D. Explain

Answer 1

A. V (velocity) may fall according to the increase in money supply or decrease in price level or amount of output produced in the country.
B. This may cause a decrease in Q or P (MV = PQ, or V=PQ/M), which may cause the overall decrease in GDP.
C. The answer is consistent with the situation, that is actually happened.